TSMC held its fourth quarter performance briefing for 2025, with the entire event live-streamed in English for global investors. The meeting outlined the fourth quarter operating conditions, provided a forecast for the first quarter of 2026, and included a Q&A session. It emphasized the forward-looking statements and their uncertainties that may be discussed, reminding participants to refer to the safe harbor statement.

In the fourth quarter of 2025, revenue increased by 5.7% to reach $3.37 billion, exceeding expectations, with a gross profit margin of 62.3%. Advanced technology accounted for 77% of the total, with 3-nanometer technology contributing 28% of the revenue. Looking ahead to the first quarter of 2026, we will continue to maintain strong growth momentum, optimize cost control, and improve profitability.

By 2025, the revenue share of HPC will reach 58%, an increase of 48% compared to the previous year; smartphones will make up 29%, an increase of 11%; IoT will account for 5%, growing by 15%; the automotive business will represent 5%, growing by 34%; and DCE will remain steady at 1%. Throughout the year, HPC, smartphones, IoT, and automotive business all experienced positive growth, while DCE remained stable.

The report summarizes the financial situation of the fourth quarter, including the total amount of cash and market securities, reasons for the increase in liabilities, accounts receivable and inventory days, operating cash flow, capital expenditures and dividend situation, as well as the growth of cash balance at the end of the quarter.

In 2025, the company achieved significant growth in revenue and profit, reaching $122 billion and 66.25 billion New Taiwan Dollars, respectively, with year-on-year increases of 35.9% and 46.4%. Capital expenditures amounted to $40.9 billion, while free cash flow increased by 15.2% to reach 1 trillion New Taiwan Dollars. The company also announced an increase in dividends, with cash dividends per share rising from 14 New Taiwan Dollars to 18 New Taiwan Dollars, with expectations to further increase to at least 23 New Taiwan Dollars in 2026.

The financial overview indicates that first-quarter revenue is expected to be between $34.6 billion and $35.8 billion, up 38% year-on-year, with a gross profit margin of 63%-65%, an operating profit margin of 54%-56%, and an expected effective tax rate of 17%-18%. Strong demand for technology supports business growth, with key information focusing on profit forecasts and market outlook.

In the fourth quarter, the gross profit margin increased by 280 basis points due to cost improvements, currency advantages, and increased capacity utilization, exceeding expectations by 130 basis points. The gross profit margin in the first quarter is expected to increase by 170 basis points to 64%, primarily benefiting from continued cost optimization and increased capacity utilization, but the expansion of overseas factories will dilute the gross profit margin by 2-4%. Overall capacity utilization is expected to increase in 2026, but the overseas factories and the initial introduction of new technologies will each dilute the gross profit margin by 2-4%, and exchange rate fluctuations are also uncertain factors.

TSMC's capital expenditure is expected to reach $49 billion in 2025, and is projected to increase to $52-56 billion in 2026 to address the growing industry demand, and continue to invest in supporting customer development.

In 2026, TSMC plans to allocate 70% to 80% of its capital budget towards advanced process technology, 10% towards special technologies, and 10% to 20% towards advanced packaging, testing, etc. Depreciation expenses are expected to increase significantly, mainly due to the accelerated advancement of 2 nanometer technology. Facing challenges such as rising manufacturing costs, the company commits to achieving a long-term gross margin of over 56% and a high shareholder return rate of over 20% by optimizing capacity utilization, cost control measures, and ensuring sustainable cash dividends.

In the conversation, it was mentioned that TSMC observed strong demand for AI-related products in 2025, with steady performance throughout the year. It is expected that the industry will grow by 14% in 2026, and TSMC's revenue is projected to increase by nearly 30%. Revenue from AI accelerators is high, and demand is growing in multiple fields. TSMC will increase investment to meet customer demand, while optimizing production capacity, with a long-term revenue target of 25% annual growth rate. Global manufacturing layout is based on customer demand and government support.

TSMC shared its capacity expansion plans globally, including in Arizona, Japan, Germany, and Taiwan, as well as progress on advanced processes such as 2 nanometers, N2P, and A16. The company stressed close cooperation with customers to accelerate capacity construction to meet strong demand in areas such as AI, HPC, and smartphones. At the same time, TSMC will continue to invest in advanced packaging technologies to consolidate its technological leadership in the global semiconductor industry.

In the discussion, the management detailed their views on the authenticity of AI demand, emphasizing the need to communicate with customers to confirm the practical applications and benefits of AI in business, including productivity improvements. Despite concerns about an AI bubble, the management, based on in-depth discussions with cloud service providers, believe that AI is gradually integrating into daily life and forming a long-term trend. For the future of the semiconductor industry, the management stated that while they cannot predict specific years, the development momentum of AI is strong, and combined with TSMC's technological leadership and customer trust, they expect the industry to continue to grow.

The conversation revolves around TSMC's expansion plans in the United States, mentioning the acceleration of factory construction in Arizona to meet the demands of customers in the AI field. It is expected that 30% of the future 2-nanometer and more advanced process capacity will be located in the United States. TSMC is working hard to overcome challenges such as approvals, while simultaneously increasing capacity in Taiwan and the United States to meet the strong market demand for AI technology.

Discussed how TSMC evaluates the electrical supply capacity of global data centers to ensure the continued growth of AI infrastructure, while also emphasizing investment plans in advanced packaging technology. It is expected that the relevant revenue will grow rapidly in the next five years, with the proportion increasing to over 10%.

Discussed in the meeting were the non-AI market demand, particularly the impact of rising memory costs on the PC and smartphone markets, as well as the growth potential in the HPC field such as networking and general servers. TSMC stated that despite facing an increase in memory costs, demand for high-end smartphones remains strong, and the company continues to work towards narrowing the supply gap. Regarding the competition in smart wafer foundry, TSMC emphasized the complexity of technology and long design cycles, believing that competitors will find it difficult to surpass them in the short term, and the company is confident in maintaining business growth.

The dialogue discussed whether Taiwan Semiconductor Manufacturing Company (TSMC) should exit the 8-inch and 12-inch wafer business and shift towards advanced packaging. It confirmed a reduction in capacity for some mature nodes, but emphasized that they will continue to support customers. At the same time, addressing concerns about softening consumer demand and rising costs, it pointed out that high-end smartphones and tablets have lower price sensitivity to components and predicted that demand will remain healthy for the next two years.

Discussed TSMC's future AI capacity planning, pointing out that despite current supply chain challenges, it is expected that supply and demand will tend to balance by 2028 through increased productivity and capital expenditure. Emphasized the shortage of engineer resources, especially chip manufacturing engineers, as a key factor constraining capacity expansion. Additionally, mentioned the impact of pricing strategies on profitability, and the importance of maintaining high profits through increasing utilization rates and optimizing capacity allocation.

The financial impact of TSMC's leading technology was discussed, including the long-term high returns of new nodes and the reasons behind them, as well as the strong demand for the 2-nanometer node and the driving force of continuous customer innovation. Emphasis was placed on the market demand driven by low power and high performance technologies, as well as the continuous value brought to customers by TSMC's annual technological improvements.

Discussed were the future five-year capacity expansion of AI chips, capital expenditure planning, and related technological developments, emphasizing the crucial role of TSMC in chip manufacturing and its support strategy for market demand growth.